Marc Faber: lack of free markets and a possible return to the gold standard

Dr Marc Faber was born in Zurich, Switzerland. He studied Economics at the University of Zurich and, at the age of 24, obtained a PhD in Economics magna cum laude. Dr Faber publishes a widely read monthly investment newsletter "The Gloom Boom & Doom Report" report which highlights unusual investment opportunities, and is the author of several books including “ TOMORROW\'S GOLD – Asia\'s Age of Discovery”.

Marc Faber, Editor and Publisher of “The Gloom, Boom & Doom Report’” talks about the lack of free markets, return to gold and a new monetary system.

The future is unknown and we are not dealing with markets that are free markets anymore. A free market is defined as a market when no market participant has a dominant influence and can manipulate the market. Now we have government interventions everywhere and you don’t know what they will buy next. They bought bonds and mortgage backed securities to depress the yields on these securities, they pushed interest rates essentially everywhere to 0, and by doing that they basically expropriate savers because money, one of the functions of paper money is to store value but at zero interest rates there is no store of value.

That is a very good sell signal! The other sovereign funds have also bought equities. Now the sovereign funds are not going to increase anymore because most of them are oil related so they have to actually liquidate and that is a game changer from one trillion dollars in assets, sovereign funds in year 2002, they went to over seven trillion, I think they are going to come down to maybe three trillion, that will have an impact on liquidity and on yields.

As for the long-term outlook, if the current set-up fails, what could replace it?

That’s why I think they will take the gold away and go back to some gold standard by revaluing the gold say from now 1000 dollars an oz. to say 10,000 dollars an oz.

This sounds rather far-fetched; at least when listening to professionals and people in academia.

Yes but I want to tell you, just in the last say twelve months, I have observed an increasing number of academics who are questioning monetary policies.

Yes but I want to tell you, just in the last say twelve months, I have observed an increasing number of academics who are questioning monetary policies.

I mean some academics that have been quite mainstream in the past. I mean John Taylor has been critical for a long time as well as Ana Schwartz but she passed away and as Milton Freedman who also passed away a long time ago. But basically now I see more and more academics and influential people, also among the Republicans that are actually questioning the Fed and also the integrity of the Fed. That is a crack and as you said the credibility of the ECB is in my view badly tarnished already because people say how could they lend so much money to Greece?

But you understand, they never ask ordinary people, they ask academics, or economists and they all also get paid somewhere because they are either in the one or the other commission, so they are not going... it’s like if you go into a hospital and a doctor has killed a few patients unintentionally, another doctor will never testify against him. He will shut up because he is afraid one day other people will turn against him. Mistakes happen. And so among academic circles you will very seldom find criticism of central banks.